Chemours says suspended execs tried to influence cash flows

HOUSTON (ICIS)–An internal review showed that top executives at Chemours tried to influence the reporting of the company’s cash flows, the US-based titanium dioxide (TiO2) and fluoromaterials producer said in an update late on Wednesday.

Chemours’ share price was up more than 7% on Thursday pre-market trading.

Chemours on 29 February announced it placed CEO Mark Newman, CFO Jonathan Lock, and principal accounting officer Camela Wisel on administrative leave, pending completion of an internal review of practices for managing working capital.

The review was triggered by an anonymous report made to the company’s ethics hotline.

In its update, the company said that the review by the board’s audit committee found that the executives “engaged in efforts” in the 2023 fourth quarter to delay payments to certain vendors and to accelerate the collection of receivables.

The executives did this in part to meet free cash flow targets, which, in turn, was a key metric for determining their incentive compensation, the company said.

The audit committee’s review also found that the executives were engaged in similar actions, though to a lesser extent, in the 2022 fourth quarter.

The findings of the internal review do not affect the preliminary, unaudited estimates of 2023 operating results Chemours disclosed on 29 February.

The preliminary results were for 2023 full-year net sales of $6.0 billion, down from $6.8 billion in 2022, with the decline primarily due to lower demand for volumes in the company’s TiO2 and advanced materials businesses.

Chemours guided to a 2023 net loss in the range of $225-235 million, compared with net income of $578 million in 2022.

The estimated  2023 net loss includes $746 million of pre-tax litigation settlements and $153 million of restructuring, asset-related, and other charges, offset by a $106 million net pre-tax gain from the sale of the company’s Glycolic Acid business.

The company is currently evaluating one or more potential material weaknesses in its internal control over financial reporting, it added.

It did not say if or when the executives may resume their duties.

Chemours is currently led by Denise Dignam as interim CEO and Matt Abbott as interim CFO and principal financial and accounting officer.

Chemical equities research firm Alembic Global Advisors said that a quick resolution of the financial reporting issues, coupled with the fact that they “were not excessive and just limited to Q4 2023, should allay investor concerns about more widespread accounting improprieties.”

Thumbnail shows Mark Newman, one of the executives placed on administrative leave. Image by Chemours.